The tight-money squeeze sent business borrowing costs to their highest level since 1931. Banks all over the nation raised their prime rate to 5% after the pace-setting First National City Bank of New York boosted its prime rate from 4½% to 5%. Since the 5% applies only to top risks, the increase means that smaller businesses will probably have to pay 5%½ or more.
The competition for available funds has been intensified by the crisis in Treasury borrowing. Since the Treasury, restricted by the 4¼% interest-rate ceiling on long-term bonds, can no longer sell such securities, it has had to compete against...
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